French Property Marketplace Update – A Moderate Cost Reduction However No Risk of a Property Crash
The last Marketplace review published by the Federation Nationale de l’Immobilier (FNAIM), which is the French National Federation of Real estate Agents, confirmed the general trend with Cost reductions throughout the 1st quarter of 2009 However emphasise on the truth there is no risk of a property crash.
According to an internal survey carried out by the FNAIM (260 estate agents participated to it), their turnover for the 1st quarter of 2009 is down by an average 30% compared to the 1st quarter of 2008. An post published in the French newspaper “Le Monde” (mentioning the FNAIM Marketplace report and a report from the French notaires) indicates that the notaires activity in 2008 decreased by 20% compared to the prior year. The entire resale Marketplace decreased by 17%, from 802,000 in 2007 to 667,000 in 2008. New create sales dropped by 37.6% (79,400 in 2008 against 127,300 in 2007).
As a consequence, the main French property developers decided Cost reductions on most of their developments throughout the 4th quarter of 2008 and the 1st quarter of 2009 by 10 to 20%.
The FNAIM mentions that the French government took a number of actions to revitalize the French New Develop Marketplace Nevertheless haven’t put in place major actions for the resale Marketplace. This can be quickly explained by the Notaire figures previously mentioned. Therefore, the recent tax incentives dedicated to French taxpayers such as “Loi Scellier” have boosted the
French investor Marketplace. It can be seen by searching at the property developer quotations on the Paris stock exchange such as Nexity which has increased by 76.22% considering that 01st January 2009. It also explains why it\’s proving even more and a lot more challenging to get further discounts on New create and Off strategy properties in France.
The resale Marketplace:
The monetary earthquake and the brutal degradation of the global economy had an impact on the resale Marketplace, Yet not comparable to the one noticed in the UK or the US. The number of transactions carried out by estate agents dropped on average by about 25% whereas the end of the Cost rise was favourable to the solvency support of the demand (%2B1.5% on average each and every year between 2005 and 2007) and compatible with the support of high level of activity, close to 700.000 transactions per year.
The property Marketplace, a slow Cost decrease, Then again no risk of a crash
Without having surprise, decrease in Cost of resale properties was confirmed in the course of the 1st quarter of 2009, on the apartments (- 0.4%) and houses (- 1.7%). But the decrease has been less sharp as a entire (- 1.0%) that those recorded inside the 3rd quarter 2008 (- 2.9%) and the 4th quarter 2008 (- 6.5%). The transactions carried out throughout the 1st quarter 2009 had been concluded at costs 9.8% lower compared to the sales realised throughout the 1st quarter 2008.
In the countryside, declines that occurred in 2008 are reflected in the costs: -7.7% and -6.1% respectively to the East and West part of France, -6.4% in the South-West, -8.8% in Centre and the Alps, -11.2% in Paris Ile-de-France and -13.3% in the South-East. With the image of the Cost evolution recorded on the Parisian Marketplace (- 4.9% over one year), there is no doubt that a lot of sellers have now agreed to moderate their asking Cost.
According to the FNAIM survey, 1 out of 2 sellers in France is now prepared to negotiate his asking Cost with an average reduction of 14%. One of the factors comes from the truth that the properties remain longer on the Marketplace: 5 months on average in 2009 compared to 3 months at the beginning of 2008. Then again even more and a lot more experts now think that costs have reached a low on the
French Property Marketplace and hope to see the end of the tunnel fairly soon, particularly with the improvement of the solvency of French buyers.
The solvency of French buyers is enhancing
The recent interest cut realised by the European Central Bank (down to 1.5% in April 2009) has contributed to ease the lending Marketplace. In France, folks can now effortlessly get a monthly repayment mortgage at 4.25% when it was about 5.15% in November 2008. And most importantly, the recent Cost reductions contributed to improve the solvency of French buyers. The solvency indicator has been growing by %2B5.2% on the 1st quarter 2009 compared to last year.
The impact of Cost decrease by 10% and of a fall by additional than 60 points of base interest rates deserve to be appreciated, considering that these two combined falls make it probable to lessen the rate of effort of the households of about 5 points. Therefore, one mortgage refused in the 1st quarter 2008 since of a rate of effort too high, is 35% even more most likely to be accepted these days, taking into account conditions prevailing on the Marketplace!
In other words, it\’s becoming less difficult for French persons to get a mortgage and this has already brought some dynamism to the Marketplace.
2009 Forecast
These last Cost reductions can only be welcomed by the property Marketplace. The mixture of costs reaching a low on the French Property Marketplace, sellers prepared to negotiate the asking Cost with an average reduction of 14% and the imminent return of French buyers on the Marketplace thanks to the improvement of their solvency, it would not be surprising to see the Marketplace picking up sooner than expected by any person.
Matthieu Cany is MD of Sextant French property. It\’s a network of additional than 160 estate agents in France offering a choice of 7700 French property for sale.
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